tv [untitled] June 2, 2012 5:30pm-6:00pm EDT
you're watching our live from moscow where it's one thirty am the headlines egypt's ousted president hosni mubarak begin serving life for his part in killing hundreds of protesters last year right now we can see some live pictures from tahrir square where demonstrators are furious with the court decision continue to rally into the night. but if you are putin vows to do all he can to prevent syria from sliding into civil war insisting russia is not taking sides in the conflict the missile defense shield an economic cooperation also came into focus as russia's president visited his german and french counterpart. having your say on our team could get
you sacked in latvia and estonia especially if you come out in defense of russians several people who call for equal rights have ended up on the security blacklist being moscow's foreign minister sergey lavrov. next maxon states to expose more dark secrets of global finance stay tuned for the kaiser. max prize or this is the kaiser report unbelievable controversy surrounding all pastry states ever passed the max. whop it's actually this one's kind of cold i deserve a rebate on that yes george osborne forced into pasty tax u. turn while we have been here the tax was twenty percent on any food served by
temperature and it was seen as symptomatic of a government out of touch with ordinary working people cameron had defended the move designed to put twenty percent that on all food sold above ambient temperature insisting that he loves a pasty well known as politicians are not above and beyond temperature along these m p's are actually cadavers out there roaming around the white all house of commons zombies repeating the same old shit over and over again but you're right to say it is past it's not pastry and we've been fighting the good fight for the people of cornwall for a number of years you know they sought regional distinction for the cornwall pasty and they deserve it like parma has the parma ham on the parma cheese the people of cornwall deserve regional distinction for the cornish pasty and i suggest that they go with this triumph and now by getting exemption from osborne's hot food and being
just out of the oven but before it's in the freezer before it drops at the train station attacks and push it further they've got the momentum next kick out all the celebrity chefs from cornwall so max perhaps george osborne to get back with the common people say opes i made a mistake i didn't mean to tax cornish pasty i meant to tax. home counties pay steve but is he above ambient temperature so men are you know so we go from pasties to cookie jars analysis j.p. morgan dips into cookie jar to offset london whale losses yes you know j.p. morgan lost all that money right there there we are in london do you see the london whale hopping through the background right munching on the plankton of fraud the krill of accounting miss leisure domain is right here with all the other big
time financial crooks in london stacey this is where they break this is where they live then they're so happy with the fraud they're committed in the city of london that the olympic event for the summer for olympic pulling a using fraudulent polls as it should was fantastic well to remind people what happened with j.p. morgan is they made a giant huge bet on the corporate credit default swap market they cornered the market and they were the only guys there along everybody else took the other side against them they're attacking attacking attacking they're still attacking but j.p. morgan chase the company has sold an estimated twenty five billion dollars of profitable securities and an effort to prop up earnings after suffering trading losses tied to the bank's now infamous london whale compounding the cost of those trades c.e.o. jamie diamond earlier this month said the bank sold corporate bonds and other securities pocketing one billion dollar in gains that will help offset more than
two billion dollars in losses as a result the bank will not have to report as big an earnings hit for the second quarter well yeah exactly this let me explain how it works with j.p. morgan and the banks on wall street it's all about reporting consistent earnings and some growth in earnings consistently over every quarter for a number of years in a row this. it's the stock price higher it gets the multiple higher it increases the value of the options tied to the stock price which end up in the pockets of the executives like jamie diamond now in order to report consistently higher earnings what jamie dimon does is on his balance sheet he has the official numbers he reports to regulators and then off the balance sheet he has one group of trades that are tied in case of one outcome and an opposite group of trades tied to an opposite outcome and at the end of the quarter depending on which is profitable and which is not he recognizes those trades at the exclusion of the other trades it's
fraud it's similar to lehman brothers repo one hundred one scam or one o five scam it's something we did on wall street for many years called a look back trade and he practices it in the multi-billion dollar multi-trillion dollar level he's a fraudster and the fact he's allowed to continue doing this is a shock going to shame well max one thing we hear over and over is that crash j.p. morgan buy silver cannot work because they are whales they are too big they are connected to the federal reserve bank here they are they have had to sell twenty five billion dollars in securities in order to make up one billion in gains they really made two stupid decisions said lydon turner a consultant and former chief accountant of the securities and exchange commission the first was taking risks with derivatives that they did not understand the second is selling assets with high income that they cannot replace in
a low interest rate environment the bank will struggle to generate as much income with the cash they received from selling the security is an excellent point in other words to offset one billion they've sold twenty five billion before having to liquidate the twenty five billion they held those securities on the books at a much higher valuation but to actually sell them in the open market to cover the one bill. and they had to recognize it as a much lower valuation of what it truly is so the value at risk accounting fraud has been exposed right here in this very trans action and it's exactly correct to suggest that the crash j.p. morgan buy suv or a campaign is working because you nibble at the fringes of the balance sheet forced them to recognize losses on their naked silver short positions and they have to liquidate for every dollar physical so every take off the market they've got to encumber themselves with another hundred dollars in debt or fresh losses exactly
and twenty five billion dollars remember they leverage up they re hypothecate right here in the city of london by infinite amounts so who knows how much that has really d. leverage them in terms of how much leverage they have over the commodity markets right and when they're on winding or deal leveraging and they're recognizing debt suddenly then the governments end up inheriting that debt at the point of a financial gun and then they turn around and impose austerity measures the cute little funny thing here max from the reuters article we're talking about taxes the pasty tax and the p.c. tax taxes on the gains if calculated at the thirty eight percent tax rate that j.p. morgan uses to illustrate its business to analysts would mean a three hundred eighty million cost to realize the gate another baked into the cake money losing situation well but max do you really really what's the answer to this
question do you believe j.p. morgan is going to pay one dollar of taxes on that game as i just explained when it comes time to pay their taxes they will suddenly draw down from their off balance sheet magical domain losses equal to those gains to offset to create no taxable income that's called look back trade i did it all the time on wall street at the end of the quarterly call to climb. you put on a spread in the options market you take that realize loss you give the account number post trade and they park in the corporate balance sheet and it offsets the game so you pay no taxes so no they were paying taxes because it's got of lots of losses waiting to be drawn down when it's convenient well j.p. morgan had to sell their profitable trades just as america and the rest of the world have been selling off their income producing assets in order to pay off all of the losses that j.p. morgan goldman sachs merrill lynch lehman brothers a.i.g. made off m.f.
global all of these losses are being paid off by us selling our income producing assets so welcome to the club jamie diamond. greece is a good example right they are paying off the austerity that's being artificially imposed upon them by selling all their income producing assets the lottery the shipping the infrastructure the roads the tunnels those are being sold off that's the income so you're selling the cows to buy milk it's a recipe for economic catastrophe and indentured servitude oh that's what they want speaking of intention servitude of course the queen is riding around town today going to tell you she doesn't perhaps have the heart to tell the people that it is the i.m.f. who is dictating policy i.m.f. calls on bank of england to cut rates the international monetary fund has called on the bank of england to cut interest rates and resume printing money to boost demand in the economy it has also asked the u.k. government to prepare a plan b.
for deficit reduction if these measures do not work well of kuku or it's because they got rid of this pasty tax they're now another seventy million pounds short right this is another economic fallacy you hear from the bank of england and the federal reserve bank or paul krugman makes the same mistake they're always focusing on aggregate demand. but they failed to recognize that you need some supply you need something to sell you need manufacturing you need wages you need capital for capitalism but they say no no we don't need actual capital all we need is debt for his eyes of foreigners yeah i can say interest rates need zero and fake demand will get fake demand for the economy even though it's creating social unrest and revolution and we create fixed supply in the precious metals markets with you know naked sales in the silver futures markets and to other things you know what they're really saying is they want more redistribution of wealth from savers to banks and
debtors i.m.f. said further monetary easing reserve quired should happen with more quantitative easing and a cut in the point five percent interest rate the last move from the mervyn king the bank of england five billion pounds from savers to speculators before that already he's sixty five billion pounds from savers to speculators these are people living on a pension these are the older people that thought they had a retirement income suitable to live on their interest rate is zero thanks to mervyn king financial repression that's what they call an economic circles it moves income that would have gone to granny over to the pockets of george osborne's tof buddies down on pasta street and various other clubs where there sipping on cranberry martinis you know ogling each other and thinking that all the just completely full of themselves for having pulled off this magic trick of starving
granny to enrich the top speculator and then finally max so here to keep it saying print more money to cover up all our jamie diamond mistake sell off our you know income producing assets to pay off all of jamie diamond mistakes c f t c chief criticizes swaps bill post j.p. morgan so the nation's top commodities regulator that the united states might they said he was. inserted about legislation under consideration in the house that would exempt derivatives transactions made by offshore branches of a u.s. bank from regulation required by the dodd frank act the bill introduced by representative scott garrett republican of new jersey would exclude from the crisis reform statute derivatives transactions between a london branch of a u.s. bank and offshore entities right once again at the end of the quarter when jamie diamond aims to manufacture a loss means to reach into that pool of off balance sheet off shore derivatives
trading what the now lobbying to be exempt from any kind of reporting standards call that loss out of magical thin air derivatives dark exchanges and dark pools it winds up on his balance sheet suddenly and now he has no taxable game so it's a slush fund is what it is and they want to legalize the slush fund and the ponzi scheme steal from the savers gut the manufacturing and force people into situations where they are indentured servants because after all that's what the queen would prefer isn't it and we must bet before the queen she's our monarch down low or she doesn't want us to work but borrow too we die because we're addicted servants on or for a complete change. when is sid vicious going to come back and sing about this properly don't test almost. stationer with thanks being on the report thank you maggie don't go away much more coming away so stay right there.
you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything you thought you knew you don't know i'm sorry is a big picture. welcome back to the kaiser report imax guys are time now to turn to simon rose of save our savers dot co dot u.k.
simon rose welcome to kaiser report thank you very much max right this is really fantastic we've been talking about our all show since the crisis began tell us how much wealth has been redistributed from british savers to the debtors the bankers the speculators well we reckon given that there's about one point one trillion pounds worth of savings in the u k. but you're talking of something of the order of about one hundred and two billion pounds which would pay for the olympics ten times over every time irving king's opened his mouth and tarts about quantitative easing what he's saying is he wants to take more money out of the pensioners pockets and savers pockets and give it to the debtors right yes he's slightly more subtle about what he wants to do to be in the deputy governor is less subtle he keeps saying savers should stop winning and just go out and get spending but you know frankly if you spent your life trying to put a bit of money but if you're old age that is not really the message you want to hear from the bank of england rather it's also. go bankrupt with that kind of thinking now who devised this reduced
a bit of policy work how does it work does it come from what quango thought of this god awful mess who thought of only i mean essentially you know we used to an economy that worked when the base rate was actually. above inflation and that went on with one tiny exception from the late fifty's through the crisis hitting that is how things worked and suddenly when the crisis hits they slam based resound no point five percent but instead it is an emergency measure which we told it was it just kept it that people use this term financial repression meaning that the bank is involved in an institutionalized form of repression by keeping rates artificially low or this quantitative easing is not the natural rate rates would be if the banks simply got out of the way yeah absolutely and it's you know we grumble because we represent savers and savers are having a terrible time of it some people have got mortgages say well i'm all right that's fine but it has such a massive effect you know money has a price the same as anything else and if you suppress the price of money then it
turns out all the wrong signals the economy does not work we've seen that three years of virtually zero interest rates and ease gumming up the economy what happens is that the banks can't actually function in the normal way so they take greater risks savers who can actually get a decent rate of return they might take. to risks the whole economy does not work if you have interest rates at this level what is the bank doing suppressing like this surely we're supposed to be sniffing and a free market economy and what is happening is that just de capitalizing the country now imagine our miners there and going back to the origins of the us of mass you know the two thousand and seven two thousand and eight period there as the subprime crisis in the states and of course terry had the collapse of northern rock and there was huge crisis of bankruptcy bradford and bingley and they were offering these one hundred twenty percent mortgages and the liar loans with one hundred twenty percent mortgages they were offering bigger loans than the underlying value
of the house even when the value was cut by the appraisers they came in with fraudulent appraised values and that's what it sounds like that's they want to go back to what they would not you that's what they want to go back to at all the problem is we're so heavily indebted to this country that they've got no option they painted themselves into a corner when i bought my first place two and a half time salary is what you were allowed and that seemed to work fairly well and then somehow through the first ten years of this century so how boring for all manner of things just became acceptable and we're now floating on a sea of debt in this country it is quite extraordinary charges that the savings has been undermined is that the debt has escalated out of control i know not only in the u.k. but it is extraordinary and what's more we now have these pathetic pettifogging all humans between politicians about whether we should have growth or a sorority i mean that's not what the argument should be or the market argue it should be about looking at actually below level of debt in the u.k. we had our deputy prime minister
a man called nick clegg the other day actually saying that in the next six or seven years what they were doing was getting rid of the debt because we have to have a clean slate for our children and our children's children and you think. when the deputy prime minister of the country come till the difference between the deficit and the debt but really shows perhaps why we're in such an appalling mess it's a difference that even the chance of the second go wrong a couple of times in the budget but there is a sector in the economy that benefits from creating trillions of debt and then of course is the banking sector the same to have incredible leverage in lobbying influence in governments around the world including this government and they're not crying that the debt levels are exploding because they make money processing creating this debt and in dealing with the servicing of this debt and there is this idea of what's called the fire economy fire insurance and real estate we talked about the mortgage market we talked about the sub prime we talked about brad for
bailing going bankrupt so this is all part and parcel of this fire economy that's all based on securitization of assets like mortgages to create them and tradable securities and it all ends up going into the city of london and it squeezes out right in saying simon rose that this squeezes out to some degree or perhaps a very large degree other productive aspects of the economy your thoughts here i used to think i confess that people are talking the banks was a little unfair but they're not to keep it up to i mean three hundred twenty five billion pounds of course has to be seen whether it's gone just sitting in the bank still being used for anything useful i can remember when banks have essentially two rows they would help people with their household finances and they would support companies they would help them raise money that would help them buy other companies what is all the rest of it for let me let me jump in right quick here because this notion in this country a lot of the media banker bashing that it's unfair there's too much of it and
there's a lot of character assassination i know i engage in it myself all the time but some of us let's break it down as economists it's not about character assassination and ad hominum attack. and banker bashing is the fact that you've got this one sector of the economy that's growing like a cancer at a rate of cancer but it does in the world do you start productive it doesn't air anything to the underlying fabric of the economy that's sustainable and productive it just. isn't fair and it which is totally dependent on the at the moment the fact that the extra money stops being produced they're in deep trouble the bank of england actually brought out a report. which i suspect the move you can probably didn't see before went out the door he probably would have stopped it saying that in fact by bailing out the banks what we are doing is setting ourselves up for an even bigger collapse to come and the implicit subsidy to the banks for being bailed out is worth two hundred twenty billion pounds over two years and they're paying themselves much more in terms of
profits and pay as a result what when even the bank of england realizes that what has happened is obscure palling then you know everything you have been saying about them frankly is true well as you know mervyn king he is kind of an interesting figure because he unlike ben bernanke is obviously drunk the kool-aid who is has no wavering doubt about his certainty in matters of monetary policy moment kings seems to make some statements there where he is has some doubt about all of this fiddling going on it but does he have any power ultimately or does seem to for up to the i.m.f. because this is or other world organizations other banking this seems like there's a lot of power now with the i.m.f. world bank these other global banking institutions the bank of international settlements to be i.a.s. who are really calling the shots more and more you know that here we have burman king seemingly deferring to some greater authority it is that what's going on there are i'm not sure he would or you go through he doesn't i mean he heads our own
monetary policy committee which is tasked with ensuring the stability of the pound . particularly yes absolutely as a result is inherently bad for the country. does he know when there are two problems either he knows in which case he should be doing or doesn't that we wish he probably shouldn't be the governor of the bank of england so it's just a quick air well yeah and he claims you know now you've probably heard the speech he made recently in which he basically came nothing was to do with him at all it wasn't his fault the fact that he presided over a very lax monetary policy while the bubbles were building seems apparent this attention entirely but the m.p.c. has been going for fifteen years they've been told to keep inflation to two percent by successive chancellors and over that time the r.p.i. the measure of inflation that most people would use not the one of course the government now uses has gone up by fifty three percent but a lot of staples the things that i mean we're concerned because a lot of savers particular people who are pensions things they have to buy things
like eggs and flour and petrol and coal and. that's of the mill a lot of things have doubled in price in just fifteen years so the main reason for the m.p.c. which is to keep our currency at a sensible level and not to let it be undermined completely and it's just a failed entirely m.p.c. monetary policy committee you know yes i'm sort of never seeing you know having you know not nine men usually men good and true almost all academic economists most of them with no experience of the real world at all and all macro economists or central planners absolutely in a purportedly account well what exactly you have kept to have kept base rates at no point five percent since march two thousand and nine neighboring assisting point there you've got to doing economic forces you see the price of stuff that people are buying at the shop is going up rapidly but you've got house prices are still in other parts of the economy the bond market and other areas like greece etc
experiencing deflation and you could call their exploding so you have these two these two forces in the economy is it be me ask you this is it because we're seeing . thing. that we haven't seen before which is an organic kind of growth of policies that have gone out of control or have our financial engineers that have been so active architecting this economy invented a way to keep asset prices higher without ever seeing labor costs rise well certainly at the moment i mean of course wages is rising much less the price inflation is why most normal people who don't work in the city in this country are feeling poor all the time and why it would be so depressed how do they manage to do that to get as surprised as a go i keep because the labor you know down here is that by design or by default think they're clever enough to think i think by design not as a tool but it's you know it's very simple if you start producing extra money where
does it go it goes into the city by the time it gets down to the lower level steven me prices have already gone up you say goes into the city but they banks in the city are now majority owned by the taxpayer how are they able to afford a good at the taxpayers not seeing much benefit from that right i mean interventions of course something like one point three billion pounds we have going to see any of that back you know does that sit on the. seat of actually declaring that as being a part of the deck no of course they're not just like they're not declaring any of the future liabilities as being dead so whatever tending the debt is not there at all but it's crazy the problem is that we have not actually corrected anything that was wrong before we went into this crisis so. it's a christmas pantomime. conservatory funny. what you think is the pantomime horse richard a bit later i leave that up to you to decide so i'm going to read a time thanks for being on the kaiser report and that's going to do it for this edition of the kaiser report with me max kaiser and stacey herbert and i thank my guests simon rose of save our savers going to send me an e-mail please do so at